Argentina is playing hardball with the vulture funds, which have been trying to force it into an involuntary bankruptcy.
The vultures are demanding what amounts to a 600% return on bonds bought for pennies on the dollar, defeating a 2005 settlement in which 92% of creditors agreed to accept a 70% haircut on their bonds.
A US court has backed the vulture funds; but in the middle of August 2014, Argentina sidestepped its jurisdiction by transferring the trustee for payment from Bank of New York Mellon to its own central bank. That play, if approved by the Argentine Congress, will allow the country to continue making payments under its 2005 settlement, avoiding default on the majority of its bonds.
Argentina is already foreclosed from international capital markets, so it doesn’t have much to lose by thwarting the US court system. Similar bold moves by Ecuador and Iceland have left those countries in substantially better shape than Greece, which went along with the agendas of the international financiers.
The upside for Argentina was captured by President Fernandez in a nationwide speech on 19th August 2014: “When it comes to the sovereignty of our country and the conviction that we can no longer be extorted, and that we can’t become burdened with debt again, we are emerging as Argentines. If I signed what they’re trying to make me sign …. we would enter into the infernal cycle of debt which we’ve been subject to for so long.”
The deeper implications of that infernal cycle of debt cycle have been explored by Adrian Salbuchi: Where territories were once captured by military might, today they are being annexed by debt.
The still-evolving plan is to drive destitute nations into an international bankruptcy court whose decisions would have the force of law throughout the world. The court could then do with whole countries what US bankruptcy courts do with businesses: sell off their assets, including their real estate. Sovereign territories could be acquired as the spoils of bankruptcy without a shot being fired.
Global financiers and interlocking private megacorporations are increasingly supplanting governments on the international stage. An international bankruptcy court would be one more institution making that takeover legally binding and enforceable.
At present, sovereign governments can say no to the strong-arm tactics of the global bankers’ collection agency, the IMF. However, an international bankruptcy court would allow creditors to force a nation into bankruptcy, where territories could be involuntarily sold off in the same way that assets of bankrupt corporations are.
For Argentina, says Salbuchi, the likely prize is its very rich Patagonia region, long a favorite settlement target for ex-pats. When Argentina suffered a massive default in 2001, the G7 mainstream media machine proposed that Patagonia be ceded from the country as a defaulted debt payment mechanism. Debt for Territory: swapping public debt for government land.
The corporate banksters’ idea would be to transform a perceived Argentine public debt default into direct equity investment in which creditors can become land owners where they can develop industrial, agricultural and real estate projects.
Ceding Patagonia from Argentina was first suggested in 1896 by Theodor Herzl, founder of the Zionist movement, as a second settlement location for what became Zionist Palestine.
In 2002, an IMF deputy manager called Anne Krueger asked: “Should countries like Argentina be able to declare themselves bankrupt?” Krueger’s article was posted on the IMF website and flagged up as proposing some new and creative ideas on what to do about Argentina. With the US DC corporation and its Fed money laundry itself now bankrupt and facing imminent public default, this American-sourced idea has become contemporaneously risible
In today’s delicate post-2008 banking system, a new sovereign debt crisis could thwart the corporate élite’s plans for an orderly transition towards a new global legal architecture which would allow orderly liquidation of financially-failed states like Argentina.
Argentina’s present debt crisis can be traced back to 1955, when President Juan Domingo Perón was ousted in a very bloody US/UK/mega-bank-sponsored military coup.
Perón was hated for his insistence on not indebting Argentina with the G7 mega-bankers. In 1946 he rejected joining the IMF. In 1953 he fully paid off all of Argentina’s sovereign debt. Once the mega-bankers got rid of him in 1956, they shoved Argentina into the IMF and created the Paris Club to engineer decades-worth of sovereign debt for vanquished Argentina, something they’ve been doing until today.
Many sovereign countries have been subjected to similar treatment. When the country cannot pay, the IMF sweeps in with refinancing agreements with strings attached, including selling off public assets and slashing public services in order to divert government revenues into foreign debt service.
It is worth asking a fundamental common-sense question: Why should national governments indebt themselves in hard currencies, decades into the future with global mega-bankers, when they could just as well finance these projects and needs far more safely by issuing the proper amounts of their own local sovereign currency instead?
The big banksters’ financial claims on wealth – bonds, mortgages and bank loans – are lent out to become somebody else’s debts in an exponentially expanding process. National economies have been obliged to pay their debts by cutting back new research, development and new physical reinvestment. This is the essence of IMF austerity plans, in which the currency is “stabilised” by further international borrowing on terms that destabilise the economy at large. Spiraling debt results in price inflation, since businesses have to raise their prices to cover the interest and fees on the debt.
For governments to escape this austerity trap, they need to spend not less, but more money on the tangible capital formation that increases physical productivity.
But where to get the investment money without getting sucked into the debt vortex? Where can Argentina get funding if the country is shut out of international capital markets? The common-sense response, Salbuchi observes, is for governments to issue the money they need directly.
An alternative which can have virtually the same effect is for nations to borrow money issued by their own publicly-owned banks. Public banks generate credit just as private banks do; but unlike private lenders, they return interest and profits to the local economy. Their mandate is to serve the public, and that is where their profits go.
Funding through their own government-issued currencies and publicly-owned banks has been successfully pursued by many countries historically, including Australia, New Zealand, Canada, Germany, China, Russia, Korea and Japan.
Sovereign nations do need to be able to buy foreign products that they cannot acquire or produce domestically, and for that they need a form of currency or an international credit line that other nations will accept. But today, a global change is becoming manifest: sovereign nations are breaking away from the dying oil and weapons driven US dollar as the global reserve currency.